Contributed by Michael Perez, Ari Rosenbaum and Robert Marsh, King & Wood Mallesons

The Federal Court has held in Uber BV v FC of T2017 ATC ¶20-608; 2017 FCA 110 that an individual operating as an uberX driver was supplying “taxi travel” under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act). Accordingly, regardless of turnover, the individual was required to be registered for GST purposes.

The question before the court was one of statutory construction: does the service provided by uberX drivers constitute “transporting passengers, by taxi or limousine, for fares”?

Background

Under the GST Act, enterprises with GST turnover of less than $75,000 do not need to register for GST purposes. An exception to this rule, found in s 144-5 of the GST Act, is where, in carrying on the entity’s enterprise, the entity supplies “taxi travel”. The term “taxi travel” is defined in the GST Act as “transporting passengers, by taxi or limousine, for fares”. Therefore, if uberX drivers supply “taxi travel”, they need to register for GST purposes even if their GST turnover is less than $75,000.

The applicant sought a declaration from the Federal Court that the supply provided by a specific uberX driver was not “taxi travel”.

The parties’ submissions

The applicant’s primary submissions focused on the construction of “taxi travel” and included submissions that:

The exception in s 144-5 of the GST Act was intended to apply only to the taxi industry and should not be construed to extend to a new state of affairs even though it may be possible, logically, to do so

The statutory context suggests that the words “taxi” and “limousine” bear a trade or non-legal technical meaning

The ordinary meaning of the words “taxi” and “limousine” should be heavily influenced by the underlying state and territory regulatory regimes of “taxis”, and

The terms “taxi” and “limousine” must have different meanings for the purposes of the definition.

Based on the above, the applicant contended that uberX services display none of the essential operational features of a taxi service including that uberX vehicles are marked differently to taxis, the manner of booking and requirement to accept customers differ, and the privileges and payment systems and calculation differ.

The applicant also submitted that uberX services are different to the ordinary meaning of limousine services (which involve, among other things, large, luxury and expensive vehicles which are pre-booked and pre-selected).

In response, the Commissioner contended that it was incorrect to rely on the state and territory regulatory regimes to produce a concept of “taxi” and “limousine”. Instead, the Commissioner:

• relied on alternative dictionary meanings to support the proposition that a “taxi” is merely a vehicle for hire by the public which transports a passenger at his/her direction for a fare that will often, but not always, be calculated by reference to a taximeter, and

• submitted that the term “limousine” refers to a private motor vehicle made available for public hire and which transports a passenger at his/her direction for a fare. The difference between a limousine and a taxi was said to be that a limousine will generally not calculate a fare by reference to a taximeter and will need to be pre-booked. It was therefore submitted that the term “limousine” could apply to any hire car.

On this basis, the Commissioner argued that uberX drivers supply “taxi services” either by transporting passengers by taxi or by limousine.

The court’s finding

In agreeing with the Commissioner, Griffith J held that:

[a] plain object of Div 144 was to address this problem by requiring all persons who supplied ‘taxi travel’ to be registered for, and remit, GST. I accept the Commissioner’s construction that, in these circumstances, the concept of ‘taxi travel’ as defined in s 195-1 should be construed broadly and not technically.

His Honour had regard to Sundberg J’s judgment in Lansell House Pty Ltd v FC of T2010 ATC ¶20-173; [2010] FCA 329 and preferred adopting a practical and common sense approach to the interpretation of the words “taxi” and “limousine”.

His Honour rejected the applicant’s submission that the phrase “taxi travel” is influenced by the regulatory concept of “taxi” and held that the ordinary meaning of the word “taxi” (which should be preferred) has a higher level of generality than the specialised trade meaning.

Importantly, his Honour also accepted the Commissioner’s submission that the relevant provisions of the GST Act should be regarded as “always speaking”. As such, the fact that the technology used to facilitate uberX may not have been contemplated at the time the relevant provisions were inserted into the GST Act was not determinative of whether the definition of “taxi” applied to uberX.

Therefore, his Honour, utilising the dictionary definitions of “taxi”, accepted the Commissioner’s submission that uberX drivers were transporting passengers by “taxi”.

However, his Honour rejected the Commissioner’s submission that the ordinary meaning of limousine was not confined to luxury vehicles. Rather, his Honour held that the ordinary meaning of “limousine” was “a private luxurious motor vehicle which is made available for public hire and which transports a passenger at his or her direction for the payment of a fare”. Therefore, while the Honda Civic used by the driver in this case was not considered to be a “limousine”, his Honour did not discount the possibility of other uberX drivers providing a taxi service by transporting passengers by “limousine”.

Observations

A number of observations can be made about the case, including the following:

This judgment obviously directly impacts uberX drivers. However, the principles of construction articulated by his Honour may also apply in a variety of GST matters, especially in industries governed by a particular regulatory regime. While entities in these industries may have applied the law based on the influence of the regulatory regimes, this judgement indicates that a more general approach may be adopted

The case endorses the principle that expert evidence is not admissible as to the ordinary meaning of a word or phrase; in this case, expert evidence as to the ordinary meaning of “limousine” was inadmissible

A distinction exists between the legal meaning of a word and its literal meaning and the task to statutory construction is based on context, taking into account legislative history and extrinsic materials

While a word in a tax statute may more readily be construed consistently with a trade meaning, this is not always the case — this case is an example where “taxi” was given its ordinary meaning

The GST Act will, generally, be construed in a practical and common sense way and not in an unduly technical way

The GST Act, at least in this case, is one which is “always speaking”, and

Caution needs to be taken when using dictionary meanings; they are not a substitute for a proper task of statutory construction — although in this case, the outcome was consistent with a dictionary meaning.

This article was published in CCH Tax Week. CCH iKnow has useful information relating to GST.